How to start a law firm

This guide summarizes published bar rules and agency pages as of October 2026; it is not legal advice, and your own bar’s current rules govern.

What a firm owner takes on, and the shapes a firm can take

A firm owner runs a bank account that belongs to clients, carries or discloses insurance, picks an entity the bar allows and answers for every ad. Most of that is set state by state.

• Solo, from home or a virtual office. The State Bar of Texas’s practice checklist says “A physical office space is not required to practice law in Texas, making it financially easier when first starting out.” Two catches come later in this guide: Florida ads must name a real office location, and Google will not list a virtual office.
• A small firm in a professional entity. A professional corporation, PLLC or LLP, depending on what your state allows. California and Florida differ sharply here.
• By fee model. “Historically, lawyers have charged clients on an hourly rate or contingency fee basis, but many lawyers now offer alternative fee arrangements, such as a flat fee,” the same Texas checklist notes. In our experience the model follows the practice area: contingency for injury, flat fees or retainers for criminal, family and estate work.
• Nonlawyer ownership, in one state of the three covered here. Arizona licenses “alternative business structures”, defined as “a business entity that includes nonlawyers who have an economic interest or decision-making authority in a firm” (Arizona Supreme Court). Texas and Florida bar sharing fees with nonlawyers, covered below.

How many firms, and how small. The 2023 County Business Patterns file counts 165,491 establishments under NAICS 541110, Offices of Lawyers, with 1,093,331 employees and $137.30 billion in annual payroll. Most are small: 71.8% had fewer than 5 employees and 94.2% fewer than 20, while only 14 had 1,000 or more. Practices with no employees are counted separately, and the 2023 Nonemployer Statistics show 274,000 under the wider NAICS 5411, Legal Services, with $23.17 billion in receipts. That line includes title and settlement offices, so it is not a count of solo lawyers.

The outlook for lawyers

Bureau of Labor Statistics figures for occupation 23-1011, published on O*NET, show 864,800 lawyers employed in 2024 and a 2025 median wage of $76.76 an hour, or $159,670 a year. Growth from 2024 to 2034 is rated “Average (3% to 4%)”, with 31,500 projected job openings. That median is both what you give up by leaving a salaried job and what an experienced associate will expect from you.

Demand is broad. IAALS found “66% of the population experienced at least one legal issue in the past four years,” and that lawyers (23%) and family members (21%) were the two most used sources of help. For estate work, Caring.com’s 2025 survey found only 24% of Americans had a will. Neither figure sizes your local market.

The license you have, and the duties a firm adds

Practicing law requires admission to the bar of the state where you practice, and there is no federal law license. Opening a firm adds duties that a salaried lawyer usually left to someone else. The table sets out how Texas, Florida and California handle the main ones, with Oregon and Arizona as the exceptions to the national pattern, as each source stated them in October 2026. Rules change; confirm with your bar before you open.

State	Agency	Trust account	Malpractice cover and entity
Texas	State Bar of Texas, Texas Access to Justice Foundation	Separate trust account, records kept five years after the representation ends. IOLTA mandatory since 1989, at a TAJF-approved bank	“Malpractice insurance is not required in Texas.” Entity formation through the Secretary of State, with an EIN
Florida	The Florida Bar	Monthly reconciliations, an annual client balance list, a written firm plan naming signatories, no overdraft protection. Annual IOTA certification	No requirement to carry or disclose coverage found in the October 2026 rules. Professional service corporations, PLLCs, sole proprietorships, partnerships or LLPs
California	State Bar of California	Trust account maintained in California. Annual CTAPP registration, 12-question self-assessment and certification by February 1	Written disclosure to the client if you have no coverage. No LLCs; a law corporation registers with the State Bar
Oregon	Oregon State Bar	Not covered here	Professional liability coverage required for private practitioners with principal offices in Oregon, through the Professional Liability Fund
Arizona	Arizona Supreme Court	Not covered here	Licensed alternative business structures may include nonlawyer owners

Trust accounts and IOLTA in Texas, Florida and California

Every state rule opened for this guide requires client money to sit in a separate trust account. What differs is how much paperwork the bar expects to see, and when.

Texas. Under Rule 1.15, client funds “shall be kept in a separate account, designated as a ‘trust’ or ‘escrow’ account, maintained in the state where the lawyer’s office is situated,” and “Complete records of such account funds and other property shall be kept by the lawyer and shall be preserved for a period of five years after termination of the representation.” The Texas Access to Justice Foundation says “Lawyers who handle money for their clients must participate in the Interest on Lawyers’ Trust Accounts (IOLTA) Program”, mandatory since 1989, and that “Only client funds that are nominal or held for a short period of time may be deposited into IOLTA accounts.” The checklist adds the practical step: open the account “at a TAJF-approved bank,” then complete the foundation’s New Account/Notice form.

The Texas point that surprises new owners is about retainers. Summarizing Ethics Opinion 611, the checklist says money received “as an advance payment for legal services you will perform in the future” is “fully refundable, regardless of whether the retainer agreement says it is nonrefundable,” and the portion paid for future services “must be deposited in an IOLTA account until earned.” Calling a fee nonrefundable in the engagement letter does not move it into your operating account.

Florida. Florida calls its program IOTA, and its Chapter 5 rules are the most detailed of the three. Rule 5-1.2 requires an account “clearly labeled and designated as a ‘trust account’,” and the lawyer “is required to make monthly: (A) reconciliations of all trust bank or savings and loan association accounts,” plus a comparison against client ledgers and “an annual detailed list” of client balances. A firm keeps a written plan naming each signatory and “the name of each lawyer who is responsible for reconciliation of the law firm’s trust account(s) monthly and annually.” Rule 5-1.1 adds two lines worth taping to the monitor: “A lawyer must not authorize overdraft protection for any account that contains trust funds,” and each member “must certify annually, in writing,” compliance with or exemption from the IOTA rule.

California. Rule 1.15 requires client funds, “including advances for fees, costs and expenses,” to go in accounts “labeled ‘Trust Account’ or words of similar import, maintained in the State of California.” An advance flat fee may go to the operating account only if, among other conditions, the lawyer discloses in writing “that the client has a right under paragraph (a) to require that the flat fee be deposited” in trust. On top of the rule sits the Client Trust Account Protection Program: “Licensees must complete the five-step process to fulfill their the annual CTA reporting requirements by February 1 of each year,” which means registering every IOLTA and non-IOLTA account, answering “the 12 question self-assessment” and submitting a certification of compliance. Changes to an IOLTA account are reported “no later than 30 days after the change.” CTAPP is one of six annual renewal requirements; the 2026 renewal deadline was March 30, 2026, and if requirements are not met, “your license may be suspended.”

Malpractice insurance: required, disclosed or optional

• Oregon requires it. ORS 9.080 gives the bar’s board “the authority to require all active licensees of the state bar engaged in the private practice of law whose principal offices are in Oregon to carry professional liability insurance” and “to establish a professional liability fund.” That fund is the Oregon State Bar Professional Liability Fund.
• California requires disclosure. Under Rule 1.4.2, a lawyer without professional liability insurance “shall inform a client in writing, at the time of the client’s engagement of the lawyer,” and within thirty days if coverage lapses during a matter. Representation that “will not exceed four hours” is excepted. A California law corporation must also give the State Bar “proof of security for claims for errors and omissions,” usually a shareholders’ guarantee (Rules of the State Bar).
• Texas does not require it. “Malpractice insurance is not required in Texas, but many lawyers feel it is important to carry for a variety of reasons,” says the State Bar’s checklist.
• Florida. No rule requiring lawyers to carry or disclose coverage was found in Chapters 1, 4 or 5 of the October 2026 rules. Check with The Florida Bar before relying on that.

Google’s Local Services Ads screening for lawyers also lists professional liability insurance where local law requires it.

Entity, firm name and fee sharing

Entity. Texas leaves the choice to you: “Decide if you want to form an entity through the Secretary of State’s office,” and if you do, get an EIN. Florida’s Rule 4-8.6 lists “professional service corporations, professional limited liability companies, sole proprietorships, general partnerships, or limited liability partnerships.” California shuts the LLC door: “Nothing in this title shall be construed to permit a domestic or foreign limited liability company to render professional services” (Corporations Code 17701.04). A California law corporation “must have a currently effective certificate of registration issued by the State Bar,” and its name “must include a designation of corporate existence such as ‘Professional Corporation,’ ‘Prof. Corp.,’ ‘Corporation,’ ‘Corp,’ ‘Incorporated,’ or ‘Inc.’”

Firm and trade names. Texas Rule 7.01(c) allows practice “under a trade name that is not false or misleading,” and a lawyer holding public office may not stay in the name while not “actively and regularly practicing with the firm.” Florida’s Rule 4-7.21 allows a trade name that “does not imply a connection with a government agency or with a public or charitable legal services organization,” and only lets you advertise under it if it is the same name on your letterhead, business cards and office sign. “Legal clinic” and “legal services” are reserved for practices offering routine work “for fees that are lower than the prevailing rate.” California’s Rule 7.5 applies the same government and charity limit to “logos, letterheads, URLs, and signature blocks”, so check the domain before you buy it.

Fee sharing. “A lawyer or law firm shall not share or promise to share legal fees with a non-lawyer,” says Texas Rule 5.04(a), and Florida’s Rule 4-5.4(a) reads almost the same. Any marketing or lead deal priced as a percentage of fees runs into that rule outside Arizona’s program. Between lawyers, Texas Rule 1.04(f) allows a division only “in proportion to the professional services performed by each lawyer” or between lawyers who “assume joint responsibility,” with the client’s written consent before the referral, including “the share of the fee that each lawyer or law firm will receive.” California’s Rule 1.5.1 also requires a written agreement and the client’s written consent after disclosure of “the terms of the division.”

Setting up the business side

• EIN. The IRS issues one without charge; “You never have to pay a fee for an EIN.” Apply after the entity is formed.
• Two accounts at minimum. The trust account and an operating account; the Texas checklist says “If you form a legal entity, you need to open a business operating account.”
• Engagement letters. Texas Rule 1.04 makes the point flatly: “In the case of a contingent fee, a written agreement is mandatory.” Build the fee terms, trust handling and any insurance disclosure into one template.
• Insurance beyond malpractice. “Laws requiring insurance vary by state,” says the SBA. General liability and cyber coverage are worth pricing for any office that holds client files. Workers’ comp depends on the state: California requires it of “Every employer except the state” (Labor Code 3700), Florida from four employees outside construction (Florida Statutes 440.02), while Texas “doesn’t require most private employers to have workers’ compensation” (TDI).

Office, software and systems

An office is optional in Texas, but Florida ads must name a “bona fide office location,” and Google lists only staffed offices, so most firms that rely on local search end up with a real address.

Practice management software with built-in trust accounting is the first purchase that matters. Florida’s monthly rule amounts to a three-way reconciliation of bank statement, trust journal and client ledgers, and doing that by spreadsheet is where mistakes start. Oregon’s fund treats trust software as risk control: its licensees are “eligible for Smokeball Bill subscriptions at no cost,” according to the PLF. Add a conflict check run before every consultation, e-signature, a secure client portal and call tracking by source.

Fees and cash flow

The fee model decides when money arrives. Contingency practices front case costs and wait months or years for a fee; flat-fee and retainer practices are paid at the start but, under the trust rules above, cannot treat unearned money as theirs.

No published source with a stated method gives a startup cost for a law firm, so build the budget from your own quotes for insurance, software, office and bar fees rather than a national average.

Hiring staff

Paralegals and assistants work under your supervision, and you stay responsible for their work. Florida’s Rule 4-5.3 comment adds that the rule “does not permit a lawyer to accept employment by a nonlawyer or group of nonlawyers, the purpose of which is to provide the supervision required under this rule.”

Trust account access is a hiring decision too. Florida requires the written plan naming signatories and the lawyer responsible for reconciliation to be reissued “whenever there are material changes,” which includes the day a bookkeeper or new associate joins. For associate pay, the O*NET median of $159,670 is the reference point.

Advertising rules to read before the first ad

Advertising is where a new firm meets its bar for the first time, and the three states differ in timing. Our law firm marketing page walks through how campaigns are built around these rules; the short version for a founder follows.

• Texas reviews after. Rule 7.04 has you file ads with the Advertising Review Committee “no later than ten (10) days after the date of dissemination,” and Rule 7.05 exempts website content “except the contents of the website homepage.” Rule 7.02 wants “the name of a lawyer who is responsible for the content” and the “primary practice location,” and contingent fee ads must say whether the client pays other expenses. The filing fee could not be confirmed, so ask the State Bar.
• Florida reviews before. Internet, print, radio and television ads, other than websites, are filed “at least 20 days before their first use” (Florida Bar handbook). The Bar’s advertising page sets fees from July 1, 2026 at “$250 for each timely filed advertisement” and “$750 for each late filed advertisement,” and says “any change of any kind to an advertisement renders the advertisement a new advertisement.” Boosted social posts must be filed. Where a search ad shows a trade name without a lawyer’s name, Rule 4-7.13 wants “the name of the lawyer responsible for the advertisement” displayed “as the first text.”
• California sets content rules. Every ad “shall include the name and address of at least one lawyer or law firm responsible for its content” (Rule 7.2), and a “no fee without recovery” message misleads unless it says whether the client pays costs (Rule 7.1, comment 3).

Solicitation is the line to keep in view. Texas Rule 7.03 bars in-person and regulated electronic solicitation of non-clients, requires “ADVERTISEMENT” as the first word of a solicitation text or email subject, and allows paying a lead generator only if it “does not recommend the lawyer.” Florida’s Rule 4-7.18 makes a lawyer “wait at least 30 days” after an injury or accident before targeted direct mail, email, texts or social messages.

Finding the first clients

Google Business Profile. Google treats lawyers as “individual practitioners,” and their profiles “may include title or degree certification (for example Dr., MD, JD, Esq., CFA).” A practitioner qualifies only if “They operate in a public-facing role” and “can be contacted directly at the verified location during stated hours.” Where several lawyers share an office, “The organization should create a Business Profile for this location, separate from that of the practitioner”; a solo lawyer whose firm carries its own brand shares one profile with the firm, and “A practitioner shouldn’t have multiple Business Profiles to cover all of their specializations.” A coworking office counts only if it “maintains clear signage, receives customers at the location during business hours, and is staffed during business hours” (Google Business Profile guidelines), and a virtual office does not count at all.

Local Services Ads. “Lawyers” is a Local Services Ads category with sixteen practice areas, from bankruptcy and DUI to personal injury and traffic. The screening includes owner identity verification, professional liability insurance where local law applies it, and a state bar license check for each lawyer in each practice area, after which a firm carries the Google Verified badge. Two settings need a decision on day one: Google will not credit a general law lead if you have opted into them (Google lead credits), and turning off broad search stops ads on queries such as “lawyer near me.” The program is moving into Google Ads; Google did not name lawyers in the August 2026 first phase and lists “all remaining business categories” for 2027.

Referrals. Lawyers you trained with, opposing counsel who respected you, and former colleagues are the first referral network, inside the fee-division rules above. IAALS’s finding that people turn to lawyers and family first is the reason referral work pays.

Reviews. BrightLocal’s 2026 survey found “47% of consumers won’t use a business with fewer than 20 reviews,” a high bar for a practice whose clients rarely come back. The FTC’s rule bans fake reviews and incentives “conditioned on the writing of consumer reviews expressing a particular sentiment,” and Florida adds that a lawyer “may not write or draft the testimonial.” In our experience the reply matters as much as the review: never confirm that someone was a client or mention the facts of a matter.

For the setup itself, see how we approach Google Business Profile for firms and how we run Google Ads and Local Services Ads for practice-area campaigns.

Where new firm owners get caught out

• Treating the trust account as a formality. It carries the most specific duties of anything in this guide.
• Writing “nonrefundable” and believing it. Texas treats an advance for future work as refundable.
• Forming an LLC in California. The Corporations Code does not allow it.
• Choosing a name that sounds official. California counts URLs and logos as part of the name.
• Signing a marketing deal for a share of fees. Texas and Florida bar it.
• Launching ads before filing. Florida charges again for every edit.

Questions about starting a law firm

Do I need an office to start a law firm?

Not in Texas, where the State Bar says a physical office is not required. Florida ads must name a bona fide office location, and Google lists only offices that are staffed, signed and open to clients during stated hours.

Do I need a trust account if I only take flat fees?

Usually yes, because advance fees are client money until earned in the rules opened here. Texas treats advance payments for future work as refundable trust funds, and California lets an advance flat fee skip trust only with the written disclosures in Rule 1.15.

Is malpractice insurance required for a new firm?

It depends on the state: Oregon requires it, California requires written disclosure to clients if you have none, Texas does not require it, and no Florida requirement was found in the October 2026 rules.

Can I practice law through an LLC?

In Florida, yes, as a professional limited liability company. In California, no: the Corporations Code bars LLCs from rendering professional services, so lawyers use a law corporation registered with the State Bar or another permitted form.

What does California’s CTAPP require each year?

By February 1, register every client trust account, answer the 12-question self-assessment and submit a certification of compliance. It is part of license renewal, and missing renewal requirements can lead to suspension.

Can I use a trade name for my firm?

Yes in Texas, Florida and California, if the name is not misleading and does not imply a government or charitable connection. Florida also requires that it be the name on your letterhead, cards and office sign.

Can a marketing company take a percentage of my fees?

Not in Texas or Florida, whose rules bar sharing legal fees with nonlawyers. Arizona licenses nonlawyer-owned firms through its alternative business structure program, which is a separate route.

Sources

Checked on October 3, 2026. Rules and fees change, and many are set state by state or city by city: confirm the current requirements with the agency that issues them before you apply.

• O*NET OnLine, Lawyers (23-1011.00), BLS 2025 wages and 2024 to 2034 projections
• US Census Bureau, County Business Patterns 2023, national file
• US Census Bureau, Nonemployer Statistics 2023, national file
• IAALS, US justice needs study
• Caring.com, 2025 Wills Survey
• State Bar of Texas, Texas Bar Practice, checklist for opening a sole practice (June 2025)
• Texas Disciplinary Rules, Rule 1.15 safekeeping property (Texas Center for Legal Ethics)
• Texas Access to Justice Foundation, what is IOLTA
• Texas Disciplinary Rules, Rule 1.04 fees
• Texas Disciplinary Rules, Rule 5.04 professional independence of a lawyer
• Texas Disciplinary Rules, Rule 7.01 communications concerning a lawyer's services
• Texas Disciplinary Rules, Rule 7.02 advertisements
• Texas Disciplinary Rules, Rule 7.03 solicitation and other prohibited communications
• Texas Disciplinary Rules, Rule 7.04 filing requirements
• Texas Disciplinary Rules, Rule 7.05 communications exempt from filing
• Rules Regulating The Florida Bar, Chapter 4 (October 2026 edition)
• Rules Regulating The Florida Bar, Chapter 5 (October 2026 edition)
• The Florida Bar, Ethics and Advertising Regulation
• The Florida Bar, Handbook on Lawyer Advertising and Solicitation (December 2025)
• State Bar of California, Rules of Professional Conduct, chapter 1
• State Bar of California, Rules of Professional Conduct, chapter 7
• State Bar of California, client trust account registration (CTAPP)
• State Bar of California, 2026 attorney annual renewal
• State Bar of California, Rules of the State Bar, law corporations
• California Corporations Code 17701.04
• Oregon Revised Statutes chapter 9 (ORS 9.080)
• Oregon State Bar Professional Liability Fund
• Arizona Supreme Court, Alternative Business Structures
• IRS, get an employer identification number
• SBA, get business insurance
• California Labor Code 3700 (workers' compensation)
• Florida Statutes 440.02 (workers' compensation definitions)
• Texas Department of Insurance, workers' compensation for employers
• Google Business Profile guidelines (individual practitioners, coworking and virtual offices)
• Google, Local Services Ads categories
• Google, Local Services Ads requirements (US)
• Google, Local Services Ads lead credits and general law leads
• Google, Local Services Ads broad search for legal industries
• Google Ads Help, Local Services Ads move to Google Ads
• BrightLocal, Local Consumer Review Survey 2026
• FTC, final rule banning fake reviews and testimonials (2024)